THE FOUR PILLARS OF THE NEW RETIREMENT: WHAT A DIFFERENCE A YEAR MAKES
In this latest report, Edward Jones and Age Wave track Americans’ shifting attitudes and behaviors throughout the COVID-19 pandemic to build on our original study, The Four Pillars of the New Retirement, which was released in August 2020 and introduced a completely new, holistic framework for retirement, the four pillars—health, family, purpose and finances. The landmark study generated unprecedented attention from the public, media and financial services industry, resulting in over 2.4 billion media impressions.
In The Four Pillars of the New Retirement: What a Difference a Year Makes, we explore how Americans have been faring throughout the pandemic across each of the four pillars, uncover how retirement is being reshaped, shine a spotlight on the importance of purpose in retirement, and discuss the most vital aspects of comprehensive retirement planning.
Key findings include:
Retirement planning can no longer be thought of as simply saving enough money for retirement. It requires more holistic thinking. The overwhelming majority of retirees say that all four pillars—health, family, purpose and finances—are essential to optimizing well-being in retirement. And the majority (54%) of retirees say they “wish they had done better planning for the non-financial aspects of retirement.”
Living Well in the New Retirement
Retirement is changing faster than ever before as powerful forces are converging to reshape this profound lifestage, including an unprecedented longevity revolution, the aging of the massive Boomer generation, growing racial and gender inequities, an alarming absence of financial preparation and the unique impact of the COVID-19 pandemic.
The good news is, today’s retirees define retirement in a very positive light as an entirely new chapter of life where freedom, happiness and contentment are at all-time highs. However, despite the positive experience retirees describe, they also feel undervalued and misrepresented. Only 36% of retirees believe that “retirees are highly valued in today’s society.”
The Pandemic Has Reshaped Retirement…and Our Lives
The COVID-19 pandemic has led to a retirement reboot with 69 million Americans saying the pandemic has altered their retirement timing. It has also created a financial wake-up call with 70% of Americans saying the pandemic has “caused them to pay more attention to their long-term finances.” One silver lining uncovered by our study: 76% of Americans credit the pandemic with causing them to “refocus on what’s most important in life.”
Health: The Top Financial Worry – Health and LTC Costs
Healthcare and long-term care costs remained the greatest financial worry in retirement from May 2020 to March 2021. Among retirees, 58% listed healthcare and long-term care costs as one of their greatest worries in March 2021, up from 52% in May 2020. Among pre-retirees, 66% listed it as their top concern both in May 2020 and March 2021. These concerns are warranted as the average couple needs $456,000 just to cover healthcare and long-term care expenses in their retirement.
Family: Strengthened Family Ties
When asked to grade themselves across the four pillars, Americans consistently gave themselves the highest marks on their relationships with family and friends, which rose even higher throughout the pandemic. Our study revealed an enormous amount of generational generosity with 85 million people (34% of Americans) “loaning or giving money to a family member or friend who was impacted by the pandemic.” Gen Z was the most giving generation, and Black and Hispanic Americans gave more often than White Americans.
Purpose: The Power of Purpose
While Americans’ sense of purpose took a hit near the beginning of the pandemic, retirees now feel they are doing a better job “spending their time in purposeful ways” compared to before the start of the pandemic. Nearly all retirees believe “it’s important to feel useful in retirement” (93%) and that “purpose is key to a successful retirement” (92%).
We uncovered a massive untapped force for social good with retirees saying, on average, their ideal amount of time spent volunteering would be 3.3 hours per week—four times greater than the current rate. If all retirees volunteered just 3.3 hours per week over the next 20 years, the result would be 238 billion hours of social contribution worth $6.8 trillion!
Finances: The Complex COVID Effect on Finances
The financial fallout of the pandemic was unevenly distributed, disproportionately impacting low-wage workers and younger generations. Women were much more likely to report declines to their financial and job security from the pandemic than men, further widening the retirement savings gender gap. While men’s confidence in their retirement savings has begun to rebound since the start of the pandemic, women’s remains at an all-time low. Women live, on average, five years longer than men and have retirement savings, on average, only two-thirds of men’s retirement savings. Because of this, they are both in greater need of and more desirous of help with preparing financially for retirement.
As the country re-opens for business and returns to a “new normal,” our work of understanding the four pillars of the new retirement has only just begun. The answer to the challenges of saving and preparing for a well-lived retirement lies in a holistic approach that can only be achieved with an ongoing, meaningful conversation with the American people about their changing retirement hopes, dreams and worries.
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